Oil targets new highs as OPEC+ extends production curbs through April

Oil continued its rally as the organization of major producers decided to extend limits on output through April, waiting for substantial proofs for a recovery in demand, Reuters said. Many analysts had expected a small production increase as the price of oil has risen 30% since the start of the year on hopes that the pandemic will ease, allowing for an economic rebound that should increase energy consumption.

Instead, the group of oil producers opted for caution, and their decision in favor of supply restraint quickly sent crude oil prices even higher. Latest quotes of Brent oil stayed just below 68 dollars per barrel. Oil prices usually fall when the dollar rises as a higher US currency makes oil more expensive for buyers with other currencies. Investors were surprised that Saudi Arabia had decided to maintain its voluntary cut of 1 million barrels per day through April even after oil prices rallied over the past two months.

“An array of factors coalesced to bring the parties together, but the resultant price increase will almost certainly push the parties to change their minds when they meet again on April 1, 2021,” commodity analysts at Citigroup said in a note quoted by Reuters.

Analysts are reviewing their price forecasts to reflect the continued supply restraint by OPEC+ as well as US shale producers, who are holding back spending in order to boost returns to investors.

“Oil prices could rip higher now that a tight market is likely up through the summer. WTI crude at $75 no longer seems outlandish and Brent could easily top $80 by the summer,” OANDA analyst Edward Moya said in a note.